Will Co-Signing FHA Loan Affect Co-Signer From Qualifying For Home
This BLOG On Will Co-Signing FHA Loan Affect Co-Signer From Qualifying For Home Was UPDATED On January 21st, 2018
FHA insured mortgage loans allow mortgage borrowers to have non-occupied co-borrowers to be added to the loan in order to qualify.
- Mortgage borrowers who have income but cannot document the income because they are self employed or are paid in cash often times cannot qualify for a FHA insured mortgage loan by themselves
- Many folks co-signing for a family member for a home purchase are extremely concerned on the risks associated with co-signing for the family member
- They are often put in a tricky situation where they do not want to say no but yet, they want to help the family member get their home
- Those non-occupied co-borrowers often call me because they are terrified that by co-signing a mortgage loan as a non-occupied co-borrower, it will affect them getting a mortgage in the near future
- The good news is that it will not affect them in getting a new mortgage loan but there are risks involved in co-signing not just a mortgage loan, but any loan in general
Risks Versus Rewards On Co-Signing FHA Loans
The rewards of co-signing FHA Loans is helping a loved one making their dream of home ownership come true.
- Without co-signing FHA Loans as a non-occupied co-borrower is normally done because main borrower will not qualify for a mortgage loan
- The risks associated with co-signing FHA Loan is that it is not a short term obligation
- Most mortgage loans are 30 year fixed rate mortgage loans
- Unless the main borrower refinances or sells their home, the co-signer will be on the note
- Co-signer is also responsible for the note in the event if the main borrower defaults on their FHA Loans
- In the event if the main borrower is late on the mortgage, the late payment history will be reported on the co-signer’s credit report as well
- In the event if the main mortgage loan borrower defaults on his or her mortgage loan, the co-signer will be responsible for the note
Can Co-Signing FHA Loan Hurt The Chances Of Co-Signer Getting A Future Mortgage Loan?
Co-signing does create risks for the co-signer only if the main borrower is late on their mortgage payments or defaults on their mortgage loan.
- In most circumstances, the main borrower will not let it happen
- We will discuss with the co-signing borrower in the event if they are experiencing financial difficulties
- If the main borrower pays their mortgage payments on time for a minimum of 12 consecutive months and thereafter, the monthly mortgage payment will not be counted on the co-signer when the co-signer applies for a new mortgage loan
- The co-signed mortgage loan payment will not have any impact on the debt to income calculations for the co-signing borrower as long as the main borrower can provide the co-signer 12 months of cancelled checks without a single late payment
Co-Signing Can Be A Win Win Situation
Co-signing for a family member for a home purchase can be a rewarding thing to do where you get to help your son, daughter, brother, sister, parents, or other immediate family member the chance of being a homeowner.
- Although there are risks involved if the main borrower is late on their mortgage payment or defaults on their mortgage loan, the rewards are priceless
- Most co-signers do not stay co-signers long because the main borrower normally refinance the co-signer names out after a few years or they sell their homes
FHA Guidelines On Non-Occupant Co-Borrowers
FHA is the most popular mortgage loan program in the United States. The U.S. Department of Veteran Administrations (VA) on allows spouses of veterans to be added on as co-borrowers and non-occupant co-borrowers are not allowed with VA Loans. Under HUD 4000.1 FHA Handbook, FHA allows more than one non-0ccupant co-borrowers to be added on FHA Loans. Fannie Mae does not allow non-occupant co-borrowers but Freddie Mac does on conventional loans.